An Empirical Study On The Relationship Between Audit Committee And Accounting Firms Choice

Recently, audit failure casesfrom both at home and abroad make people fromall walks of life criticize thequality of independent audit, and at the same time, alsomake people began to ponder deeply about the rationality of the design of internalgovernance mechanism. And as an important part of the internal governance structureof a company, the audit committee, if set up perfectly and act effectively, can surelyimprove the management standard of a company. Reasonable governance mechanismcompany design usually set up an independent special functional organization, whichis not subjected to the management layer-the audit committee. And as the auditcommittee is the bridge between the company and the external audit, an effectiveaudit committee can undertake external auditor selection, changes and other workspecifically, it can guarantee the independence of the external audit, improve itscredibility of the quality about the financial information, and so to impress toinvestors by a reliable, qualified image, and attract the attention of them. To sum up,as the economy of our country has rapidly developed, the governance of listedcompanies hasdrawn more attention. China begins to learn from the western countries,and introducesin the audit committee system gradually. However, due to the notabledifferences of the economic environment between the western world and us, the auditcommittee system can’t be used in the governance of listed companies in Chinadirectly. Our audit committee system is still in the initial attempting stage, so there’redefinitely some defects of it, which still need more empirical research to providesupport to its construction. So has the audit committee fulfilled its due, and if it’seffective? How to improve the characteristics factors of the audit committee to makeit more effective in fulfilling its functions?After reading many articles about theeffectiveness of the audit committee, I found they are mostly about the currentsituation of the governance of listed companies in China by studying the relationship between effectiveness of the audit committee and the external audit quality. Thecharacteristics of audit committee itself can explain the effectiveness of its set-ups.The studies of external audit quality are mostly from the perspective of audit fees,firm changes,but seldom from the perspective of certified public accountants. Sobased on the review and researchof articles about the characteristics of auditcommittee, andthe effectiveness of the accounting firms choice, also articles about thechoices made by auditors and the relationship between characteristics of auditcommittee and the accounting firms choices,I decide to study four of the typicalcharacteristics of the audit committee of listed companies: independence,specialization, scale and diligence, and associated them with the accounting firmschoices and analyze the situation of the governance of listed companies in ourcountry by the audit committee. In this article, after reading documents and based onthe above ideas, I build hypothesis, determine the research variables and set up aresearch model.I chose a group of A-share listed companies in stock markets ofShenzhen and Shanghai in2012as samples, and make an empirical test, and finallycome up with the conclusion: the independence, specialization, scales of the auditcommittee has a significant relationship with the choice of accounting firms.According to the empirical results of this article, one can see that audit committeewith good independence, and proficiency and of appropriate scale, can perform thefunctions of accounting firms most effectively, so to improve the quality ofindependent audit, and is preferred by more investors. At the end of this article, I alsopresent some specific suggestions to optimize audit committee’s characteristics, hopeto make it become an effective way to govern the listed companies in our country.